The Rhyme: the Second Chokepoint Closes & Its 1973 Echo

"History doesn't repeat… but it rhymes." — Mark Twain

Yemen's Houthi rebels declared a maritime embargo against Saudi Arabia on Monday, threatening to shut down the Bab el-Mandeb Strait and block roughly five million barrels a day of crude that Saudi Arabia has been routing through the Red Sea to bypass the already-crippled Strait of Hormuz. Iran pushed them to do it. Brent briefly topped $91 before settling near $88. The national average for gas crossed $4 again.

Brent $88.09  |  WTI $82.24  |  Gas $4.00/gal  |  U.S. crude +18% in July  |  S&P 500 7,478

Two chokepoints under threat at the same time. The last time someone used the word "embargo" as an oil weapon and gas lines followed, the year was 1973.

The Yom Kippur War was eleven days old when oil ministers from the Organization of Arab Petroleum Exporting Countries filed into a conference room in Kuwait City on October 17, 1973. Egyptian tanks had crossed the Suez Canal. Syrian armor had stormed the Golan Heights. And the United States was flying C-5 Galaxy transports loaded with tank rounds and TOW missiles into Tel Aviv around the clock, in an airlift so big that Arab governments took it as a declaration of sides.

The day before, OPEC had raised the posted price of crude by 17 percent, to $3.65 a barrel. But the men in Kuwait wanted more than a price hike. They wanted a weapon. Production would be cut five percent a month, every month, until Israel withdrew from the territories it had occupied in 1967. Any country that helped Israel would be cut off entirely. Saudi oil minister Ahmed Zaki Yamani had been warning Washington for months. Nobody in the State Department believed him.

Two days later, Nixon asked Congress for $2.2 billion in emergency military aid to Israel. By the next morning, King Faisal of Saudi Arabia had done what Yamani promised. He declared a total embargo on oil shipments to the United States.

The effect was physical. Within weeks, gas stations began running dry. Lines of cars stretched for blocks in New Jersey and California and everywhere in between. States imposed odd-even rationing based on your license plate. A gallon of regular that cost 34 cents before the embargo was selling for 84 cents by January. Nixon went on television and asked Americans to turn down their thermostats and slow down to 55 miles an hour. The country that put men on the moon could not fill its gas tanks.

The stock market moved slower than the gas pumps, but with more force. The S&P 500 had already been sliding from its January 1973 peak near 120. After the embargo, the decline turned into a rout. The Dow fell to 783 by mid-December, then kept falling for another full year, all the way to 577 by December 1974 — a 45-percent loss in the worst bear market since the Depression. The embargo ended in March 1974. The price of oil did not come back down. It stayed near $12 a barrel, four times where it started. You could lift the embargo. You could not undo the price.

Both crises share the same weapon, the same word, and the same impossible math: an economy that needs cheap energy to grow and an embargo designed to make sure it doesn't get any.

Here is what happened after October 17, 1973. It happened in stages, and nobody at the time could see the next one coming until it hit.

By December, OPEC had raised the official price to $11.65 a barrel. Oil companies scrambled to find new supply. There was none at scale. The Federal Reserve, caught between rising prices and slowing growth, chose to fight inflation. It raised the federal funds rate from 5.33 percent in December 1972 to 12.92 percent by July 1974. The intention was to break the price spiral. What it also broke was the economy. Real GDP fell 0.5 percent in 1974. Unemployment climbed from 4.6 percent to 9 percent by May 1975. The textbooks got a new word out of it: stagflation.

The S&P 500 fell 48 percent from peak to trough. And here is the part that matters most for anyone watching this in July 2026: the market kept falling for nine full months after the embargo ended. The damage was not the embargo itself. It was the price left behind, the inflation that price fed, and the rate hikes that inflation forced.

The smart money in late 1973 moved into energy, commodities, and cash. Gold went from $65 an ounce in 1972 to $195 by the end of 1974. Oil stocks ran while everything else bled.

The pattern for 2026 is sitting right there. Even if the Houthis can't enforce their blockade, even if diplomacy restarts tomorrow, the oil price has already moved. Gas is at $4. Brent is pushing $90. Last month's CPI came in at 3.5 percent. The Fed is stuck at 3.50 to 3.75 with futures pricing a hike by October. The embargo is the trigger. The inflation is the bullet. The Fed's response is what determines where the bodies fall.

In 1973, the market bottomed nine months after the embargo ended — not when the crisis started, but when the Fed finally stopped hiking. Watch the Fed, not the Houthis.

Tesla and Alphabet report earnings Wednesday after the close. The question is not revenue. It is how two of the world's largest companies price $90 oil and 3.5 percent inflation into forward guidance. In Q3 2008, earnings season turned into confession season two months after oil hit $147.